Investors in Digital 9 Infrastructure (DGI9) have arguably become inured to bad news, but the latest update this week still feels like a blow. The trust wrote down its net asset value (NAV) by about 43 per cent after obtaining “an independent valuation on certain portfolio companies”.
Numis analysts said that while the writedown was “perhaps not unexpected” given where the share price has been trading, it remained a disappointment, and there is potential for further reductions once the valuation process is complete. As at 9 September, even after accounting for the reduced NAV, Digital 9 was trading at a 58.9 per cent discount. The debt-laden trust entered a managed wind-down earlier this year, but the sale of the assets is likely to prove less than straightforward, and the timeframe is unclear.
The announcement is notably light on details. We will know more once Digital 9 publishes its interim results later this month. But the board does say that the NAV writedown is mostly to do with the “availability of finance for underlying portfolio companies and its impact on portfolio companies’ growth outcomes”. Dan Cartridge, fund manager at Hawksmoor Fund Managers, notes that it has been obvious for a long time that the trust was not in a position to obtain further funding to grow its underlying companies (given the discount on which it traded). And yet, he adds, the trust’s managers have been receiving fees based on the higher NAV until now.